* Chinese nickel investors look beyond Indonesia as

policy pressure rises

* Jakarta's taxes, mining quotas and pricing rules

unsettle investors

* Tsingshan and Lygend explore options in Madagascar,

Tanzania, New Caledonia, sources say

* Overseas projects remain difficult, expensive and

early-stage

By Dylan Duan, Gayatri Suroyo and Melanie Burton

SHANGHAI/JAKARTA/MELBOURNE, June 5 (Reuters) - Chinese

companies that helped build Indonesia's nickel industry into the

world's dominant producer are looking as far afield as Africa

for longer-term alternatives as rising policy pressure tests the

investment model that reshaped global supply.

Tsingshan Group is considering a major development in

Madagascar, the country's mines ministry said, while Lygend

Resources is looking at a project in Tanzania as well

as restarting the Koniambo operation in New Caledonia, according

to industry sources.

The Chinese companies were among those that developed the

smelters and industrial parks that turned Indonesia into the

centre of global growth for the metal used in stainless steel

and electric-vehicle batteries after Jakarta banned ore exports

in 2020.

Indonesia's share of production surged to more than 60% of

global mined nickel output in 2025, up from just over 30% in

2020, according to U.S. Geological Survey data.

The low-cost Chinese-backed output pushed the nickel market

into surplus, lowered prices and forced higher-cost producers

elsewhere including Glencore ( GLCNF ), BHP and Sumitomo ( SSUMF )

to close or suspend operations or seek buyers.

But since taking office in late 2024, Indonesian President

Prabowo Subianto has focused on raising state revenue and

spending, including a $20 billion free meal plan.

In late May, he outlined plans to bring exports of coal, palm

oil and ferro-alloys under centralised state control. Nickel pig

iron, the main nickel product by volume for Chinese producers,

was later said to be excluded, but the proposal added to

investor concerns over policy stability.

Even before that plan, tighter nickel ore mining quotas,

proposed tax hikes and a sharp upward revision to Indonesia's

benchmark mineral price had unsettled investors and led the

China Chamber of Commerce in Indonesia to write a strongly

worded letter to Prabowo warning the measures could deter future

investment.

"It's definitely negative for the industry," said Tim

Hoff, a senior mining analyst at Canaccord in Perth. "If you

have the government adding bureaucracy and controlling what you

can sell your commodities for, then that will impact the scale

of your investment."

Foreign direct investment into Indonesia fell 6% in 2025,

compared with 19% growth a year earlier. Investment in mining

peaked in 2024, while new investment into base metals refining

has also plateaued since then.

OVERSEAS ENDEAVOURS

Tsingshan, the world's biggest stainless steel producer, has

submitted a proposal worth several billion dollars to build an

industrial park covering a wide range of minerals including

nickel to Madagascar's government, the country's mines ministry

told Reuters.

Madagascar Mines Minister Karl Andriamparany said the

proposal was inspired by Tsingshan's Morowali and Weda Bay

nickel operations in Indonesia, but remained under review and no

mining permits had been granted.

Tsingshan signed a cooperation memorandum with Madagascar in

February, but the submission of its proposal had not been

reported previously. The company did not respond to a request

for comment.

Lygend, which helped pioneer high-pressure acid leach

processing to produce raw materials for nickel-rich batteries in

Indonesia, is also looking abroad.

Lygend is in talks to buy a stake in the undeveloped Kabanga

nickel project in Tanzania from U.S.-listed Lifezone Metals ( LZM )

, according to two sources with knowledge of the matter.

They spoke on condition of anonymity about the talks, which

are private and have not been reported previously. Lifezone and

Lygend did not respond to requests for comment.

In the Pacific, Lygend recently made an offer to New

Caledonia's publicly owned mining group SMSP for a stake in the

idled Koniambo nickel project following site visits last October

and November, SMSP told Reuters by email.

These prospective investments would be each Chinese

company's first nickel forays outside Indonesia.

CHALLENGING ALTERNATIVES

Indonesia's policy changes have tightened nickel supply

forecasts and lifted prices to the highest in two years,

offering a potential lifeline to operations like Koniambo, which

produced more than 28,000 metric tons of nickel at its peak in

2018.

Koniambo was shut in 2024 after prices plunged and Glencore ( GLCNF )

decided to sell its 49% stake, in a process now being

managed by SMSP.

Greenfield developments in Madagascar and Tanzania would

bring a different level of risk and lack Indonesia's combination

of scale, infrastructure and ore access.

Madagascar, where the military now rules in a transitional

government after a coup last year, in January lifted a 16-year

moratorium on new mining permits for most minerals.

Madagascar's only nickel and cobalt operation, Ambatovy, has

struggled for years and is set to be sold by Sumitomo ( SSUMF ) at a loss

to a consortium backed by an ex-Glencore ( GLCNF ) trader.

Tanzania's Kabanga, discovered decades ago, is one of the

world's largest undeveloped nickel sulphide deposits.

Lifezone estimates it would cost nearly $1 billion for the

initial development and take six years, including construction,

to ramp up to planned annual output of about 50,000 tons if a

final investment decision is made this year.

Lifezone said in December it was in advanced-stage talks with

strategic and financial investors, months after BHP sold its 17%

stake in the project amid an uncertain nickel market outlook.